Samsung sees profits slip in Q2 as demand for smartphones stagnates

Demand for tablets declined as company says “prospects for growth remain unclear.”

Samsung released its Q2 financial statements in South Korea on Thursday, and while the company turned a net profit to the tune of 6.25 trillion Korean won ($6.1 billion), that number represented a decline of 19.6 percent from a year earlier.

In a statement, Samsung said that the weak quarter was the result of slowing demand for smartphones and tablets, which led to increased marketing expenditures to reduce inventory. “Amid low seasonality, Smartphone demand remained flat [quarter-over-quarter] while [it] declined slightly QoQ for Tablet,” a Samsung presentation read (PDF). Samsung ships more smartphones than any other country in the world, and the company wrote that “slower demand for mobile devices also impacted Samsung’s logic chip business or System LSI.”

In addition to the slowed market growth, Samsung also said that the appreciation of Korea's currency played a part in eroding some of the company's profit. As the won strengthened, the company was able to bring back less of the revenue it made off consumers in foreign markets.

Samsung's second quarter results press release was cautious about the future, stating that “the second half of 2014 will remain a challenge,” and “prospects for growth remain unclear as competition over global market share intensifies in the mobile industry.” Still, the company does expect to see growth in consumer electronics next quarter, potentially spurred "by shipments of premium TVs with curved and UHD features.”

Samsung also mentioned that in the second half of the year it would “focus on releasing new premium mobile devices and a new flagship model in the large screen category, along with new mid- to low-end models with more advanced features and competitive pricing.” Analysts told The Wall Street Journal that Samsung may have to focus on creating more sub-$200 devices, as well as focus on ways to reduce the costs of making its more high-end phones.